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If the deed does not permit payment of a partner's personal loan and the firm pays it, what is the correct accounting treatment?

Answer and explanation

Correct answer: Drawings of the concerned partner

Payment of a personal liability is not a business expense of the firm. It is recorded in the partner's drawings or current account.

Related tags

Personal LiabilityDrawingsPartner AccountPartnership DeedPartnership Accounts Basic ConceptsAccountancyClass 12 Mcq

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